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TMI Blog2014 (2) TMI 418X X X X Extracts X X X X X X X X Extracts X X X X ..... dit worthiness and genuineness of the cash transaction of the cash credits in the bank account, there was no merit in the plea of the assessee - the provisions of section 68 of the Act are applicable. Applicability of peak credit theory – Held that:- The peak credit theory is not applicable as the assessee had deposited cash in the bank account and thereafter, cheques were issued to different parties - there are deposits in cash but as against the said cash deposited, various cheques were issued and the assessee was unable to explain the source of cash deposited in his bank account – there was no legal infirmity in the order of the Tribunal – Decided against Assessee. - ITA No. 713, 963, 714, 964, 712, 962/Chd/2010 - - - Dated:- 27-6-2013 - T.R.SOOD AND MS SUSHMA CHOWLA, JJ. For the Appellant: Shri Sudhir Sehgal For the Respondent: Department By: Shri Manjit Singh ORDER :- PER : SUSHMA CHOWLA, JM Out of these six appeals, cross appeals are filed by three different assessees and revenue against separate orders of the CIT(Appeals) dated 16.04.2010 relating to assessment year 2007-08 against order passed u/s 143(3) of the IT Act. 2. All the six appeals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the circumstances of the case, the Ld. CIT (A)-II, Ludhiana has erred in relying on the decision of Hon'ble ITAT, Chandigarh in the case of ITO-1(2), Ludhiana Vs. Shri Palwinder Singh for the A.Yrs. 1999-2000 to2004-2005in ITA Nos. 406 to 411/Chandi/2007, the facts of which were entirely different from the facts of this case. In that case issue was cash deposits and cash withdrawals which is not the case of the assessee. 7. On the facts and in the circumstances of the case, the Ld. CIT (A)-II, Ludhiana has erred in taking a contradictory stand by accepting unexplained cash credits u/s 68 of I.T. Act but limiting the addition not based on unexplained cash credits. 8. That the order of the Ld. CIT(A)-II be set aside and that of the A.O. be restored. 9. That the appellant craves leave to add or amend any ground of appeal before it is finally disposed off. 5. The ground No.2 raised by the assessee against limitation is not pressed and hence the same is dismissed as not pressed. 6. The issue raised by way of ground No.1 by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f recording of statement, stated that the details in respect of the various transactions would be provided on the next date of hearing. The said statement was recorded on 14.12.2009 and was further recorded on 21.12.2009. On the next date of hearing, the assessee said that he had come to give the reply and would produce the persons and the other replies by the next date. The assessee, at the close of the recording of the statement stated that he would give the explanation of cash deposits in the bank accounts of the various concerns, during the course of assessment proceedings. The Assessing Officer noted that there were cash credits amounting to Rs.1,26,66,000/- in the bank accounts of the assessee i.e. in the case of Shri Sudhir Kumar Sharma. The details of the said cash deposits were annexed as Annexure-B to the assessment order. The assessee failed to produce 10 persons for verification nor any further explanation was given in respect of the cash deposits claimed to be belonging to customers. The creditworthiness of the persons giving cash to the assessee could not be established as the assessee failed to produce the requisite details or even produce some of the persons. In v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 68 of the Act was held to be justified. 10. The next claim of the assessee of non grant of proper opportunity by the Assessing Officer was also rejected by the CIT(Appeals) in view of the various opportunities being given to the assessee for the production of books of account. The reliance placed by the ld. AR for the assessee on various case-laws was distinguished by the CIT(Appeals) vide paras 3.2 to 3.4 of the appellate order. In respect of the quantum of addition made in the hands of the assessee and the claim of addition of peak credit in the hands of the assessee and various case laws relied upon by the assessee in this regard was countered by the CIT(Appeals) in para 4.2 and it was held that, Ratio of this decision of the Hon'ble jurisdictional Bench covers the case of the appellant against it, in respect of addition u/s 68 of the Act in principle. As far as quantum of addition is concerned, it is the peak of deposits which could be added as per this decision. During appeal proceedings the ld. counsel was requested to furnish necessary details to work out such peak of deposits. These details are as per annexure-A to this order. As could be seen from these details ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e pointed out that the issue arising in the present appeal was in relation to the unexplained credits in the bank accounts wherein cash was deposited by the assessee on various dates as against which cheques were issued to different entities as the assessee had failed to establish the identity and credit-worthiness of the persons who had advanced the alleged cash to the assessee for the alleged accommodation entries, the provisions of section 68 of the Income-tax Act were squarely applicable and addition of the total cash credits was to be made in the hands of the assessee. The ld. DR for the revenue placed reliance on the ratio laid down by the Hon'ble Allahabad High Court in Bhaiyalal Shyam Behari V Commissioner of Income-tax reported in 276 ITR 38 (All). 15. In rejoinder, the ld. AR for the assessee admitted that though no cash was withdrawn from the bank account, but the money of the clients of the assessee were treated as the money of the assessee against which cheques were issued to various persons. The ld. AR for the assessee was categoric in the admission that cash was deposited in the bank account but no cash was withdrawn from the said bank account and only cheques were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on turnover. The concern M/s Shubh Krishna, which was the proprietor concern of the HUF of the assessee, was claimed to be registered with Ludhiana Commodities Exchange and other companies and firms of which he was the Director/Proprietor were claimed to be branches/traders of M/s Shubh Krishna Commodities. In view of the entries of trading being carried out on behalf of the M/s Shubh Krishna by the various companies/proprietory concerns owned by the assessee, it was explained that in case of one or two transactions, the commodity exchange entry was through the Exchange and the balance entries were client to client, which were permissible as commercial transaction, as per prevalent market trends. The assessee claimed that soda confirmation slip vouchers in respect of commodities transaction were being maintained by the assessee, which would be provided on the next date of hearing. The statements wwas again continued on 21.12.2009 and the plea of the assessee was that it had not brought any record or any persons to be produced alongwith himself on the said date of hearing, as he had come for recording of his statement. In the statement so recorded, in respect of v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icted the addition to Rs.10,55,260/-. The CIT(Appeals) however, in principle held that the Assessing Officer was correct in holding that the abovesaid additions were maintainable in view of the provisions of section 68 of the Act. 20. The assessee is in appeal before us in respect of both the invoking of provisions of section 68 in the present case and also against the addition of Rs.10,55,260/-. The revenue is aggrieved by the application of peak credit theory in the hands of the assessee and second, relief allowed to the assessee. 21. The first issue to be addressed by us in the present facts and circumstances of the case is whether the provisions of section 68 of the Act are applicable to the facts of the present case. During the course of survey conducted u/s 133A of the Act on 31.10.2007, in the statement recorded, the assessee admitted to be engaged in the business of giving accommodation entries. The modus-operandi explained during the course of survey was that the assessee was receiving the amount in cash and the same were being returned vide cheques through bank accounts. However, during the course of assessment proceedings, the statement of the assessee was again reco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate are permissible as commercial transactions. Q-.-18 You are requested to provide the soda book maintained by you for running the business. Ans: What ever is available relating to these transactions will be provided on the next date. Q:-19 Which type documents you take from the client/customer when you do the transaction for them. Ans: It is soda confirmation slip voucher commodities be provide tomorrow. Statement will be continued on 15.12.2009. In continuation to the above statement. 21.12.2009. 22. A bare perusal of the statement recorded during the course of assessment proceedings reflect that the claim of the assessee to have changed. The assessee admits that only M/s Shubh Krishna was registered with Ludhiana Commodities Exchange and rest all the concerns were the branches or traders of M/s Shubh Krishna Commodities. In respect of the cash deposit in the bank account of one of the concern, the assessee stated that it had received cash from various parties and the same was as per the books of account. The case of the assessee was that it was receiving cash from its clients. But before the Assessing Officer it was not the case of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whose name the sum referred to therein is recorded, is a venture capital fund or a venture capital company as referred to in clause (23FB) of section 10. 24. Under the provisions of section 68 of the Act, it is provided that where the assessee offers no explanation about the nature and source of the credits in the books of account, all the amounts so credited or where the explanation offered by the assessee is not satisfactory in relation to the same, then such credits may be charged to tax as income of the assessee for that particular previous year. Admittedly, in the case of the assessee, various amounts in cash are deposited in the bank accounts of the assessee and the onus was upon the assessee to explain nature and also the source of the said cash deposits. The assertion of the assessee in this regard was that it was the amount received from clients. However, the assessee failed to give the list of such persons who had advanced the said cash to the assessee. The assessee even failed to bring on record any evidence to prove its stand that it was the amount received from such persons who were his clients. The assessee failed to file any confirmation in respect of the said cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as not been adjudicated. The plea of the assessee of admission of such new factual issue is not admissible at this stage of adjudicating of the appeal in the captioned years. We find no merit in the said plea of the assessee and the same is rejected. 26. We are in conformity with the order of CIT(Appeals) in holding that the provisions of section 68 of the Act in the present set of facts and circumstances of the case are applicable and we uphold the order of CIT(Appeals) in this regard. 27. The reliance placed upon by the assessee on various case laws has been referred to and commented upon by the CIT(Appeals) and we are in conformity with the findings of CIT(Appeals) in this regard. 28. The next issue raised in the present appeals is in relation to the applicability of peak credit theory. In the facts of the present case, the said peak credit theory is not applicable as the assessee had deposited cash in the bank account and thereafter, cheques were issued to different parties. It is not a case where cash was deposited on different dates and in between, there were cash withdrawals from the bank account. It is a case where there are deposits in cash but as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account of 'A' was not genuine and, in fact, it was the assessee's own money which had been introduced in the books in the garb of a loan from 'A' and hence when this amount was available to the assessee for being introduced as a fresh deposit in the account of 'B' then it may be possible to accept the contention of the assessee. But in case the assessee all along maintains that the various loans are genuine then we fail to understand as to how the assessee can put forward the claim that separate additions for the unexplained cash credit in different accounts should not be made. When the assessee himself does not contend that the deposit made in the account of 'B' is out of prior withdrawal made in the account of 'A', how does the assessee expect the Department to subscribe to this point of view. We hence reject this contention of the assessee." Heard Sri Krishna Agrawal, learned counsel for the applicant and Sri Shambhu Chopra learned standing counsel for the Revenue. The applicant submitted that as the amount of cash credit has been treated to tax by invoking the provisions of section 68 of the Act and the said amount have been treated as income from the unexplained ..... X X X X Extracts X X X X X X X X Extracts X X X X
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